In 2017, the Texas-based electric utility Luminant announced they were closing the 1.8 GW Monticello Power Plant. A week later, they announced they were closing two more “economically challenged” coal plants.
These three power plants make up a combined total of 12 percent of Texas’ coal plant power capacity, which is enough to power almost 2.1 million homes.
Luminant said these coal plants became unprofitable due to the state’s increase in both wind and solar energy. The cost of generating electricity from coal plants can run as high as $143 per megawatt hour. In comparison, the cost for generating electricity from wind energy runs as high as $62.
These plant closings will undoubtedly result in lost jobs. It’s also left many people wondering how this will impact their electricity bill heading into the summer months.
How These Closures Could Impact Electricity Prices
These closings have created uncertainty about what the Texas energy reserves will be going forward. After the coal plant closures were announced in October, the Electric Reliability Council of Texas (ERCOT) said the state’s reserve margin could dip to 12 percent. This is lower than the 13.75 percent needed to meet peak demand.
It is unclear what the exact effects will be on customers if the energy reserves fell much lower than this. But anytime there is a decline in available resources this leads to increased pricing.
ERCOT said that record-breaking demand for power this summer could require taking emergency measures to maintain supply. This would force customers to limit their power usage.
Texas is expected to experience a dry hot summer in addition to tight electricity margins and a growing population. And there are concerns that an emergency event could trigger a brownout or blackout which would cause electricity prices to spike.
The market is tough to predict but these three coal plants retirements are likely to cause strain on capacity in the summer of 2018. While there is hope that Texas’ growing wind market could help fill in the gaps left by these closings, there is still an increased risk of electricity supply shortages.
What Does This Mean for Texas Energy Customers?
These warnings have the potential to affect your Texas energy customers in a very real way. And unfortunately, it’s not just the summer of 2018 they need to think about. Reports are showing that these pricing spikes may get worse in coming years.
For that reason, it’s important for Texas customers to take the long view when it comes to their energy needs. They should look into 24- and 36-month plans from top electricity providers.
Let your customers know they shouldn’t wait too long either. Pricing changes daily so by waiting, they could miss an opportunity for low, stable pricing.
However, Texas is not the only state where electricity prices are expected to rise. The EIA expects U.S. electricity prices to rise from 32 percent in 2017 to 34 percent in 2018. As a broker, you will want to keep an eye on market trends and encourage all your customers to lock in low pricing now.